Tis the Season to be Shopping!

Posted on November 8, 2010 by Justin

With the Holiday season rounding into full effect, I’m here to offer some helpful shopping tips to ensure a fun, and financially safe season.

General Shopping Safety tips

C ID!

One of the simplest ways to protect yourself from the hassle of a stolen credit or debit card is to make sure that the cashier checks your signature with your driver’s license.  You can do this by putting C ID on the back of the card where your signature is.  Also, at FNB Osakis, we offer photo debit cards, which places your photo right on your ID so the cashier knows its you using the card.

Save those Receipts!

It should go without saying, anytime you purchase something keep the receipt.  In the Holiday Season, when stores are busier, it is easy for mistakes to be made.  Those mistakes are much easier to correct if you have the receipt.  Also, sometimes stores will offer deals on products you already purchased, but by saving the receipt you can bring the product in and ask if you can still get that promotion.

Online Shopping Safety tips

While we always encourage you to shop local first (better service, more money stays in the community!), we understand that a growing number of people are looking for good deals, or hard-to-find products online.  The following are some tips to make sure your online transactions go smoothly and your giving spirit does not wind up in the wrong hands!

Look for the padlock!

When purchasing items from a website be certain that if a website is asking for personal and payment information, the page is secure (as the tekkies call it, SSL encryption).  If the webpage is secure most internet browsers will show a padlock icon on the bottom corner or in the browser bar and will have a web address that begins with https:// (not to be confused with http, look for that “s”).

Use a credit card!

With a credit card, if the number is stolen you can dispute the charges and the credit card company with take care of all the follow-up.  If your debit card is stolen, it can result in late fees and overdraft charges to your checking account before things get cleared up.  While debit cards have clear advantages elsewhere (see the post on Credit Scores Demystified), credit cards are advantageous online.  Now, they still can pose problems if you over-spend, causing you to carry a balance and pay high interest on that balance, so USE THEM WITH CAUTION.  If you don’t have a credit card, at FNB Osakis, we can issue a card with a reasonable limit that can help you shop safely online.

Don’t be hasty!

It is easy to speed through webpages when making a transaction, but it is important to read all the fine print.  Websites often default you into signing up for their advertisements, flooding your inbox with spam emails.  Also, some “deals” can carry conditions that are not clearly explained; just when you thought you were getting a bargain, because you didn’t purchase a certain amount you are not eligible for that particular “deal.”  Also, many online retailers allow you to check out as a guest, which can eliminate the useless emails (and often reoccurring spam) that comes with registering.

Free Shipping?

You will see many claims of free shipping, but often it will be a much slower method of shipping.  So last minute shoppers beware!   Many websites are good about guaranteeing delivery by a certain date, but others are not.  In addition, if you are shipping directly to the loved one the gift is intended for, it is good practice to keep the shipping codes and “track shipping” to ensure the gift was delivered.  Most online retailers will provide you this code automatically, if not, an email to customer service with your specific order # should do the trick.

Comparison Shop!

Some deals are too good to be true.  You can avoid giving money to a fraudulent website by comparison shopping.  Most search engines (I use Google) have features that can price shop products for you.  There you can see the various prices for the product, which will allow you to check and see if the deal you have in mind is in the ballpark of what the product should be going for.

Coupons and Coupon Codes!

The real deals are not in the prices the retailers are listing, but in the codes you can apply to your order.  Websites often email their registered users special codes that give discounts or free shipping.  You do not have to be registered to get those “deals.”  Message board websites, which consist of consumers just like you and me, will post codes that you can use.  One of my favorite websites, Slickdeals.net, allows you to search for the website, brand, or product to see if users have posted any recent codes that you can apply to your order.  Check it out!  You will be surprised how much you can save.

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Bank Local!

Posted on October 19, 2010 by Justin

Banking, in general, has been sullied by the bad reputations of the largest, Wall Street, banks.  Most community banks had no part in the predatory lending and speculative trading that led to the financial crisis.  In fact, most community banks operate solely to serve there local communities.  These Main Street banks have stayed in business because they know their customers and understand their local markets.

In a world where we have become increasingly anonymous it is important to understand that our financial decisions have a direct impact on the community we live in.   The folks at the Institute for Local Self-Reliance have summarized the importance of banking local to both consumers and their communities.

1. Get the Same Services at Lower Cost

Most locally owned banks offer the same array of services, from online bill paying to debit and credit cards, at much lower cost than big banks. Average fees at small banks are substantially lower than at big banks, according to national data. Studies show that small financial institutions also offer, on average, better interest rates on savings and better terms on credit cards and other loans.

2. Put Your Money to Work Growing Your Local Economy

Small businesses, which create the majority of new jobs, depend heavily on small, local banks for financing. Although small and mid-sized banks control less than one-quarter of all bank assets, they account for more than half of all small business lending. Big banks, meanwhile, allocate relatively little of their resources to small businesses. The largest 20 banks, which now control 57 percent of all bank assets, devote only 18 percent of their commercial loan portfolios to small business.

3. Keep Decision-Making Local

At local banks, loan approvals and other key decisions are made locally by people who live in the community, have face-to-face relationships with their customers, and understand local needs. Because of this personal knowledge, local financial institutions are often able to approve small business and other loans that big banks would reject.

4. Back Institutions that Share a Commitment to Your Community

The fortunes of local banks  are intimately tied to the fortunes of their local communities. The more the community prospers, the more the local bank benefits. This is why many local banks are involved in their communities. Big banks, in contrast, are not tethered to the places where they operate. Indeed, they often use a community’s deposits to make investments in other regions or on Wall Street.

5. Support Productive Investment, Not Gambling

The primary activity of almost all small banks  is to turn deposits into loans and other productive investments. Meanwhile, big banks devote a sizeable share of their resources to speculative trading and other Wall Street bets that may generate big profits for the bank, but provide little economic or social value for the rest of us and can put the entire financial system at risk if they go bad.

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Credit Scores Demystified

Posted on October 1, 2010 by Justin

You probably hear credit scores mentioned routinely in the news or on commercials, but have they ever been properly explained?  Most often, by the time you’ll understand what a credit score is, and why it should be important to you, you might have already made decisions that lower your score.  The focus of this post is to explain credit scores, how your decisions impact them, and why you should care about them.

The simplest definition of what a credit score is: a number (more formally called a FICO score) that summarizes your credit risk based on your financial behaviors.  These behaviors include: the types of loans you have, how much outstanding debt you have, how much available credit you have, and how often you make your payments.

Why have credit scores become so important? Well, frankly, because many banks and lending institutions have become so big they know very little about their customers, nor do they find it cost effective to initially assess their customers’ lending risk.  The largest banks have policies in place that approve or deny loans solely based on your credit score.

Where can you see your credit report? www.annualcreditreport.com is a website created by the three credit reporting bureaus to provide consumers with a free annual credit report in accordance with Fair and Accurate Credit Transactions Act. Instead of pulling a credit report from all three credit reporting bureaus, we advise that every 4 months you pull a report from one of the three bureaus, allowing you to look at your credit report on a more current and constant interval.  If you pull a report from all three bureaus at the same time, you won’t be able to pull another free credit report for 12 months.  Seeing your score costs extra, however, because your score is based off the information in your credit report, you can get a rough idea of what your score is based upon the information in the credit report.

What’s a good or bad credit score? There are three credit reporting bureaus: Experian, TransUnion, and Equifax.  The scores reported by each bureau will vary by 10-50 points or so due to the formulas the different bureaus use.  Credit scores range from 300-900, with the majority of people between in the 600-800 range.  Scores of 700+ are excellent, 650-699 are good, and 620-650 are OK.  Consumers with scores below 620 will have difficulty getting loans and credit with reasonably favorable terms.

In 2009, the national average FICO score (for all intents and purposes, the credit score) was 692. In Minnesota, the average score is 707.

What types of decisions can impact your credit score? The following are the five main components of your credit score: Types of credit in use, Amount of new credit, Length of credit history, Amounts owed, and Payment history.  The graphic below shows the relative importance of each component.

How can you improve your credit score?  Check out this article for a more detailed version of the summarized advice listed below

  • Pay more than the minimum – length of repayment matters to the credit reporting bureaus, and you’ll have a much shorter repayment period if you make more than the minimum payment each month.
  • Negotiate – working out a plan with your lenders is much better than letting a sour situation go worse.  Most lenders would rather make it easier for you to repay than let you default, and making good on a restructure shows that you have your finances in order.
  • Switch to debit cards – you can still swipe plastic, but you aren’t adding to your debt pool.  Debit cards deduct from your checking account and allow you to live within your means.  You run the risk of swelling your debt by using your credit cards to purchase everyday expenses, such as food or gas.
  • Get rid of those store charge cards – You know what I’m talking about, every time you are at a chain store they ask “would you like to open a X account and save X%?”.  Just say NO!  Fewer cards equals less debt, and a lower propensity to use debt.  You may save that X% initially, but you’ll make up for it the second you miss a payment on that card.
  • Contact the credit reporting bureau – if you see errors on your credit report, get them fixed!  There is a place for comments on your credit report, all you have to do is call the credit reporting bureau’s phone number listed on the credit report and notify them of any errors.

How can you damage your credit score? Check out this article for a detailed description of the summarized advice listed below.

  • Late payments – the biggest factor is missing, or simply not paying, your debt on time.  You’d be surprised just how much your score is impacted by being late on something as trivial as cell-phone bill.
  • High balances on credit cards – a high amount of debt on your credit cards is a sign of financial weakness to the credit bureaus.  In a perfect world, you’d pay your credit cards off every month.  Keep your credit card balances as low as possible.
  • Lots of applications – your credit score will go down for every time your credit report is pulled.  To avoid this, you shouldn’t apply for credit too often.  Or in the case you are car shopping, do all your shopping on the same day, because that’s only one hit on your credit report.
  • Having the majority of your credit be the same type – especially if it is credit or charge card debt, because it shows a reliance on higher-interest, higher risk-related credit to finance your living expenses.

At the First National Bank of Osakis, we like to stress that the credit score is only a component of your financial history.  Customers are people, not numbers, and the dialogue accompanying your financial history is just as , if not more, important than the score itself.  However, we insist that you keep an eye on your credit score because of its implication in other aspects of  their lives, such as getting insurance (higher or lower rates), your tv/internet/phone rates (some companies require deposits if your score is too low), and qualifying for student loans.  In addition, it’s never too early to explain to your children, siblings, or friends the importance of their credit score.

So, get your free credit report once every 4 months and contact the credit reporting bureau for any errors.  While we at FNB do not attach numbers to faces, we feel obligated to help those in the community understand their importance so they can make informed financial decisions.  For more information on credit scores, I encourage everyone to read through this 20-page brochure put out by FICO, the company that actually calculates your credit score.

As an aside, our hope is for this blog to continue to explain financial concepts, programs, regulations, and practices to the community, as well as discuss what we’ve been up to.  PLEASE feel free to leave any questions or requests for topics to cover in the comments.

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